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Respondent determined a deficiency in petitioners' 1989
Federal income tax in the amount of $5,434, and an accuracy-
related penalty under section 6662(a) in the amount of $689.
After concessions by both parties, the Court must decide whether
petitioners are entitled to a short-term capital loss carryover
deduction for the year in issue.
Some of the facts have been stipulated and are so found.
For clarity and convenience, our findings of fact and opinion
have been combined. Petitioners resided in Mayer, Arizona, when
their petition was filed.
On their 1989 Federal income tax return, petitioners claimed
a short-term capital loss carryover deduction of $139,384. This
carryover originated from a nonbusiness bad debt deduction of
$205,029 petitioners claimed on the Schedule D attached to their
1985 Federal income tax return. Resolution of the 1989
deficiency depends upon the validity of the claimed bad debt
deduction in a prior year. Sec. 6214(b).
On their 1985 return, Schedule D, petitioners originally
claimed that the $205,029 nonbusiness bad debt deduction was for
J. Riviera Boats, Inc (Riviera). Riviera was a business entity
formerly owned and operated by petitioners. Petitioners now
allege that the $205,029 bad debt deduction stems not just from
Riviera, but also from Arizona Marine, another business entity
formerly owned and operated by petitioners.
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